The Center for Democratic Empowerment (CEDE) The 2007/2008 Draft Budget of Liberia Is Not Auditable, Accountable & Transparent – Says Auditor General Morlu

Over the weekend, Liberia’s Auditor General, John S. Morlu released his review of the 2007/2008 Draft Budget of the Republic of Liberia. In a ninety-nine page-document, AG Morlu concluded that the “Budget does not meet the minimal test of completeness and fair disclosure. It is not auditable. It is not accountable. It is not transparent. It does not measure the true financial position of the Republic of Liberia. It is lacking substantive information.”

The Auditor General stated that his review of the budget should have taken place before the budget was submitted to the legislators, but the Budget Bureau failed to serve him a copy of the Draft Budget. According to him, he was only given a copy of the draft budget after the intervention of Representative Slopadoe of Grand Kru County.

Auditor General Observations:

• Budget’s pages not numbered.

• No table of contents is provided.

• There are no explanatory notes; there is no executive summary for the draft National Budget.

• There are just too many spelling errors in the draft National Budget, with Liberia misspelled as “Libesria” (see second last page of budget) and Company for “Companty” (see last page). Charges equaled “Charages,” etc.

• Budget does not indicate whether figures are in Liberian dollars or U.S. Dollars.

• What is the exchange rate, if stated in US Dollars?

• There are approximately 360 pages (counted individually) of the draft National Budget.

• 360 pages reflect a virtually purposeless listing of Expenditure and a mere 3 pages for the Revenue portion.

• Expenditure portion of the Budget is, somewhat, an improvement over the prior years; it shows measurable program objectives, lists major activities, and some institutions are linked to pillars of interim poverty reduction strategy.

• High priority items do not reflect critical policy statements and poverty reduction pillars such as national security, fighting corruption, employment (the economy), rural development, among others; there is disconnect between policy statements and budget commitments.

• Expenditure portion also described succinctly the functions of each government institution receiving funds.

• However, actual expenditures for past period are still not reported; many agencies and their internal units don’t even bother to reveal their full time employment, although boxes are indicated.

• Revenue portion of budget (3 pages only) is an Executive Summary, with aggregate numbers.

• Revenue equaled to expenditure; the more revenue the likelihood on more spending on programs.

• Revenue portion lacks details, including assumptions, tables, schedules, etc.; macro economic analysis that informs projections not provided.

• Revenue portion fails the minimal test of financial disclosures, making it reasonably impossible for the National Legislature to evaluate the Budget.

• The World Bank, IMF and UNDP that have many advisors in the country, as well as private think tanks such as the Open Budget Index organization agree that governments must inform all elements of society on budget contents and that the budget process must be participatory. This budget fails to meet these minimal requirements

• Budgets are driven by assumptions, and without assumptions, how can legislators evaluate the draft National Budget? Without civil society participation, how can the budget claim to reflect the priority goals of the citizens?

• Revenue Budget cannot be evaluated given the information provided; it is an executive summary.

• There is no detailed comparative year over year analysis.

• Budget performance report should be included in the National Budget as foreword to the 2007/2008 budget figures, so that the public can read both together to make an informed decision as to how to participate in the budget discussions in the National Legislature.

Auditor General sees FLAWS:

• IMF informed Auditor General on May 22, 2007 that the current cash balance of the Government of Liberia at the Central Bank of Liberia was US$47 million.

• There is no line in the Revenue Portion of the Budget for “Open Balance” (carry forward amount from surplus funds).

• Projection for end of year balance of funds MUST serve as a first step in analysis of the Fiscal 2007/2008 National Budget. Where is the projected yearend surplus?

• What is the value of vouchers unpaid and outstanding? How has that number been treated to give the surplus?

• How are projected bank account balances at line ministries, commissions and agencies treated in the draft National Budget?

• UN Panel of Experts identified similar flaws in budgeting and reporting during this administration’s first, Recast Budget.

• Getting the Opening Balance is important to avoid corruption through leakages.

• If not reflected, it could give room for extra budgetary spending or corruption.

• There is expectation of supplementary budget in September 2007 to deal with yearend surplus funds…but projection should be made and included in the 2007/2008 budget to be appropriated by the National Legislature.

• What happens to the funds leftover in various institutions’ bank accounts as of June 30, 2007?

• Funds in individual institutions’ accounts should form part of the yearend surplus funds, as “consolidated open balance.”

• Open balances (carry forward) are a basic, fundamental principle of any accounting and financial management system.

Despite mountains of difficulties he has been encountering since his arrival here over a month ago, AG Morlu’s review has created enthusiasm among Liberians – making this draft budget the most scrutinized budget in the history of Liberia. He has no office, no vehicle and no budget to run the general Auditing Commission. But he works around the clock.

Additionally, the Auditor General wants for the benefits from the infamous “Downsizing, Rightsizing” exercise to be included in the budget. Though profit-making public corporations are not included in the budget, those that do not make profits are included in the budget – he says all public corporations should be included in the budget. Also absent in the budget are the projected benefits from the lifting of the United Nations’ sanctions on Liberian Diamonds and Timber. This is important because we have told the UN over and over that the sanctions were hurting our economy.